Industry experts have voiced considerable caution regarding bullish statements that American oil giants will rapidly pump tens of billions of dollars to revive the country's crumbling production facilities.
Requirement of Absolute Assurances
Without an “iron-clad guarantee” of financial backing from the Washington, experts believe global energy giants to proceed with great care.
“It seems too early to discuss any potential investments,” a representative stated recently.
The aggressive timeline of less than a year and a half has been publicly proposed. Yet, expert analyses paint a more cautious outlook.
A Probable Schedule
“It is likely going to take multiple years for any kind of output increase,” said an energy analyst.
The analysis indicates oil companies would likely spend:
- The first year: Sorting through new operating agreements.
- Following phase: Beginning rebuilding of facilities.
- Year three: Starting to boost output.
This would lead to an boost of around 500,000 bpd perhaps by the end of the decade.
Interest vs. Appetite for Risk
Experts make a important separation between firms' attention and their appetite to invest heavily.
“In my view their interest is an eight, on a scale of ten. But their readiness is a four or five, because there is no clarity yet.”
Veteran operators in the sector share this view. They believe that majors will politically talk up the opportunity while actually proceeding with great care.
The Enormous Cost
The monetary investment would be colossal. Independent estimates suggest that adding between half a million and a million barrels per day would require in excess of $10 billion in capital spending over several years.
But, rebuilding production to peak levels of around 2.5 million bpd could require a staggering $80 billion to $90 billion over six or seven years.
The Pending Issue of Taxpayer Funding
The idea of energy companies being paid back by the federal government has been repeatedly raised. But, specific plans on this proposal have so far not been forthcoming.
This lack of a solid plan is the primary factor behind the industry's hesitation. Firms seek protection against nationalization and the risk that a future president could cancel any promise.
“You need to be shielded from sovereign risk, that we’ve seen in Venezuela already.”
Ultimately, while rhetorical optimism runs high, the financial risks suggest a journey of measured steps for potential major venture in the country's energy industry.
